Harris & Trump Lay Out Different Visions for the US Economy
Laurence Hale, AAMS®, CRPS®
Principal/Managing Partner, Investment Advisor & Chief Investment Officer
With only a few weeks remaining before the presidential election, former President Donald Trump and Vice President Kamala Harris have laid out how they plan to keep the economy growing. Many of their policies rely on tax breaks that curry favor with working-class Americans.
The two candidates differ on their approach to corporate taxes, with Trump lowering them and Harris raising them. And neither candidate has provided much clarity on how they will fund the ballooning deficits their policies exacerbate. Let’s jump into some of the details.
Appealing to The Average Joes
Both Trump and Harris have a smattering of proposals aimed at appealing to the average Joe. Both candidates have said they plan to shore up Social Security, but neither have provided specifics. In addition, they both agree on eliminating taxes on tips.
Trump pitched the idea of eliminating taxes on overtime pay and Social Security benefits. Meanwhile, Harris would like to raise the minimum wage and end the sub-minimum wage for tipped workers and people with disabilities.
The two candidates disagree on what should be done on the large portions of the 2017 Tax Cuts and Jobs Act (TCJA) that expire in 2025. The TCJA was signed into law by former President Trump and he’d like to make permanent any parts of the act due to expire. Harris, on the other hand, would increase capital gains tax from 20% to 28% for anyone making $1 million a year or more. She’d also impose a 25% tax rate on any household with more than $100 million in assets. She would not raise taxes on households making less than $400,000.
For those living in high-tax states like Connecticut, New Jersey and New York, Trump has proposed reinstating taxpayers’ ability to deduct state and local taxes on their federal tax returns. The SALT deduction was capped at $10,000 in the TCJA to raise revenue. The cap is often far lower than what many residents in the tri-state area pay in local taxes.
Keeping Food Affordable
Harris has announced a batch of policies she believes will reduce elevated food prices. She would instruct her administration to prohibit unfair mergers and acquisitions that create big corporations with the power to raise prices and she’d investigate reports of price fixing. She’d also propose a federal law prohibiting price gouging, which would be in addition to the rules that states already have on their books.
Reducing Healthcare Prices
Harris has referred to reducing American’s health care debt, but hasn’t given specifics. She’d like to extend the $35 cap on insulin and $2,000 annual cap on out-of-pocket medical costs beyond seniors to all Americans. And she’d allow Medicare to “accelerate the speed” of drug price negotiations and “crack down” on the drug companies that block competition and the middlemen who raise costs for consumers.
While president, Trump tried to repeal the Affordable Care Act (ACA) but so far he hasn’t detailed any plans on the subject. Harris would uphold or even expand the ACA.
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Building More Houses
Harris would help consumers afford their first home by providing $25,000 toward a downpayment. She’s also focused on increasing housing supply and lowering the cost of rent. She’d expand the Low-Income Housing Tax Credit to incentivize private and non-profit developers to build 1.2 million new affordable homes. She’s also proposing a Neighborhood Homes Tax Credit to support the new construction or rehabilitation of more than 400,000 owner-occupied homes in lower income communities.
Another tax cut will incentivize homebuilders to build affordable homes for first-time homebuyers. She will also provide funding to state and local governments with the goal of building more affordable housing. She favors the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, which would “crack down” on companies that use pricing algorithms to boost rents too much. She’d also remove tax benefits for large investors that buy up large numbers of single-family homes that they plan to rent. Trump has promised not to build low-income housing developments in areas with single-family houses.
Corporations Get Goodies Too
One of Trump’s most expensive proposals involves reducing the corporate tax rate on companies that produce goods in the US to 15%, down from 21% currently. Here there is a stark difference between Trump and Harris, who has proposed raising the corporate tax rate to 28%. She’d also quadruple the tax rate on corporate stock buybacks to encourage companies to invest in growth and productivity.
Trump has proposed immediate writeoffs for capital expenses and an expanded tax credit for research and development to boost domestic manufacturing and corporate research.
Helping Startups
Harris would expand the startup expense deduction from $5,000 to $50,000 and cut red tape like unnecessary licensing requirements in order to encourage the formation of small businesses. She plans to launch a small business expansion fund that will help small businesses make their loan payments when starting up or expanding. She’d like a third of federal contract dollars to go to small businesses along with a number of other programs.
At The End of The Day...
The reality is that the candidates can make proposals until the cows come home but the president doesn’t have much control over the economy – or even tax policy. Most proposals need to be approved by Congress, which is currently split, with the Democrats controlling the Senate and the Republicans controlling the House of Representatives. If Congress remains split between the parties, many of the future president’s policies may be nothing more than wishful thinking.
At WHZ we’re always focused on how national and world events are affecting portfolios as an essential component of the work we do to keep our clients’ financial strategies on track. We’re happy to answer any questions you may have about how the presidential election will affect your personal finances or your business, and share how we can help you to create a financial strategy in alignment with your specific goals. Contact us for a complimentary consultation on our website at whzwealth.com, or give us a call at (860) 928-2341.
Authored by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.
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